Asian Shift

Asian Shift

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work with you as well as against you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be familiar with all of the risks associated with foreign exchange, and seek advice from an independent financial advisor if you have any doubts.

In the Forex market there are three distinct trading sessions. There is the Asian session, followed by the European session, and then finally rounded out by the North American session. For most currency pairs, the majority of the trading takes place during the European trading session.

This trading system takes advantage of the fact that on most days the Asian session is quite calm compared to the European trading session.

The first thing we need to do is to draw a box around the Asian session, which is loosely defined as 11 PM GMT through 8 AM GMT (the first bar starts printing at 11:00pm and the last bar is complete at 08:00am GMT). We will draw a box around the one hour bars during this time and include the highest and lowest point of this time in our box.

Also, in this eBook we will look at one currency pair — which is EUR/USD. This is because the EUR/USD is one of the most traded currency pair in the Forex market, and it has a good volatility.
Please feel free to test this trading system on other currency pairs you like (i.e. GBP/JPY – EUR/JPY – GBP/USD – etc.) as it can work on all currency pairs.

On most days we will see the EUR/USD follow a restricted trading pattern during the Asian session, and then during the European session we will see the pair make a violent move in one direction.

You can see in this chart that from 11:00pm – 08:00am GMT, the EUR/USD has traded within the blue box. This is the box that we draw every day on the one hour chart time frame.

If the range of the box exceeds 150 pips, we will not take any trades that day. However, if the box has a range of 150 pips or less, we will look to take a trade once the market trades and closes outside of the box, either higher than the Asian session high or lower than the Asian session low.

When the European session begins trading, we see a big move up but it closes back down. Despite the fact that during the Asian session the EUR/USD has been moving steadily side ways, we see this quick move upward during the first trading hour during the European session.

This move is the fake out bar, and we try to avoid the trap of following the fake out bar.

The Fake Out Bar

We could have been fooled into taking a trade here, but if we wait for the market to trade and close higher or lower than our box, we significantly reduce the likelihood of following the fake out bar.

Let’s look at an example:

Sell trade taken on this bar since the bar closes lower than the box.

Entry Point

Here we see that the market has traded and closed lower than our box, so we enter a sell trade.

We place our stop loss at the high of the box.

Our Stop Loss is placed at the high of the box.

Our profit target is the same distance as the range of our box. In this case our box range is of 30 pips. Therefore, we would place our profit target 30 pips from our entry point.

Range of the box (30 pips)

Entry Point Profit Target

In this instance our profit target would have been achieved for +30 pips. Also, as you can see, this day the market pushed down even further and we could have been able to max out our profits.
In order to do that safely, it is recommended to open two positions, close one position at profit target, move the stop loss to the entry point and let the second position run for another 30 pips from the profit target for a total of 60 pips.

As you can see, the two profit targets would have been achieved for a total of +60 pips that day.

Let’s look at another example; this is the box for the very next day.

This box, at 159 pips, is just a bit too big, so we will not take the trade.

In this case we didn’t see any trade that day, our rule of the 150 pips range box did indicate us to stay out of the market.

Let’s have a look now at another fake out bar, where our method keeps us out of the market and avoid a potential loss.

A couple of days later, we see a small box of 25 pips, and a sell signal is triggered.

Our profit target of 25 pips is hit the next day, 24 hours after the trade was taken. We take an additional sell trade on the current day’s signal.

That additional trade will last another 24 hours before we can close it bagging +35 pips, and we will add another trade that will be closed for an additional +33 pips the very same day.

The Asian Shift system can be quite profitable. And can help you bag consistent profits daily. Like every trading system, it is recommended to stick with the rules, and not let your emotions come in to play. Discipline and consistency is needed to be a good trader, and come out profitable over all.

I would encourage you to look at different rules if you think that there might be a better way for you to trade the Asian Shift.

For example, you may decide to:

– Exit a trade after the market closes back inside the box rather than waiting for the market to hit your stop loss at the midpoint of the box

– Use a trailing stop rather than a profit target

– Move your stop loss to breakeven after the market moves 50% of the way toward your profit target

Many of these alternative rules can be tested in Forex Tester or Meta Trader. I encourage all traders to manually test trading strategies with Forex Tester or Meta Trader, it is a great way to get good at manual trading, and they are the ideal software’s to use to test a system such as this one.

Happy Trading!

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work with you as well as against you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be familiar with all of the risks associated with foreign exchange, and seek advice from an independent financial advisor if you have any doubts.